SAC Hit With $1.7 Billion In Redemptions

Feb 19 2013 | 9:34am ET

Investors moved to pull almost $1.7 billion from SAC Capital Advisors at Thursday's redemption deadline, significantly more than the hedge fund said it expected and in spite of the firm's moves to reassure clients over an insider-trading probe.

Clients put in redemption notices for $1.68 billion. SAC will pay out about $660 million next month and the rest over the course of the year; the firm's policies allow investors to withdraw only one-quarter of their money per quarter.

Reports indicate that SAC will not have a problem making the first payment on March 31, and that the redemptions will not have a material impact on the firm. SAC has been dogged by a federal insider-trading investigation and has braced for Thursday's deadline since November, when a former portfolio manager was arrested and charged with insider-trading and the firm itself said it would likely face a Securities and Exchange Commission lawsuit.

"As we have been saying, the redemptions will have no significant impact on our funds," a SAC spokesman said Friday.

In the weeks and months leading up to Thursday, SAC had indicated it expected about $1 billion in redemptions; the firm manages $14 billion, but only $6 billion of that is from outside investors. Instead, it will lose more than one-quarter of its outside capital, despite last week loosening redemption terms to give investors the opportunity to see how the investigations play out; SAC founder Steven Cohen is thought to be the chief target of the probe, but SAC has said it is confident he will not face charges.

Just before Thursday's deadline, SAC told investors that they would be permitted to withdraw one-third of their capital in each of the remaining three quarters of the year. That would allow them to wait until May to see how the investigation progresses while still being able to get all of their money out by the end of the year.

Indeed, it is likely that things could have been worse without that move: The Blackstone Group is leaving more than $400 million of its $550 million invested with SAC due to the new terms, at least for now.

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